With a $10B War Chest, a Multinational Targets U.S. Asset Managers
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Wednesday, May 16, 2018

With a $10B War Chest, a Multinational Targets U.S. Asset Managers

A publicly traded, family-controlled multinational appears poised to go on an acquisition spree thanks to a multi-billion-dollar war chest, and it looks like the U.S. asset management industry is a prime target.

"We have the capacity over the next five years to put about $10-billion of capital to work to play a consolidation game — and to play the game in the big leagues," Paul Desmarais Jr., co-chairman of Montreal-based Power Financial, said last week after the company's annual meeting, the Globe and Mail reports.

Power, controlled by the Desmarais family, owns 67.7 percent of Toronto-based Great-West Lifeco, which in turn owns 95.7 percent of Putnam Investments [profile], the U.S. mutual fund shop led by Bob Reynolds. Great-West Lifeco's U.S. arm also includes Empower Retirement, the second-biggest defined contribution plan recordkeeper.

According to the Globe and Mail, Desmarais "is pointing to the United States as the place most likely to attract the company's capital." Indeed, Power president and CEO Jeffrey Orr reportedly wants to double Putnam in size (it had $169.5 billion in AUM as of the end March) and is on the hunt for deals "given the significant value that can be be created through increased scale."

Indeed, earlier two weeks ago Great-West Lifeco president and CEO Paul Mahon said that he was looking for "the right-fit acquisition" to bolt on to Putnam. And in February Empower's chief, Ed Murphy, talked to MFWire's sister publication, 401kWire, about the recordkeeper's M&A interests.

Desmarais mentioned other places for deploying some of that $10-billion war chest, places like China, England, and Germany. If Power ends up putting it all into the asset management space, at the usual pricing range of between one percent and four percent of AUM, they could buy an asset manager with hundreds of billions in AUM.

Last week Power reported Q1 2018 net earnings of C$0.82 per share, up year-over-year from C$0.70 and ahead of the consensus analyst expectation of C$0.80.

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